Quote of the Month:
“We cannot solve our problems with the same thinking we used when we created them.” – Albert Einstein
Managing Christmas Business Volatility: Planning for Success
As Christmas approaches, businesses are racing to maximise any remaining opportunities before the holiday lull. While the festive season is joyful, it can bring volatility for many businesses, disrupting "business as usual" and creating challenges.
The Discounting Dilemma
Discounts are now an expected part of the holiday season, but offering deals comes with risks. For a business with a 20% gross profit margin, offering a 15% discount requires a 300% increase in sales just to maintain the same profit level. Understanding your profit margins is crucial. While discounting can help move excess stock, create demand, or attract new customers, it’s essential to know the numbers behind your pricing strategy. Packaging products or offering value-added services can provide alternatives to straight discounts, allowing you to offer perceived value without cutting too deeply into profits.
Christmas Cost Hangover: Control Expenses
Operating costs often rise over Christmas due to the need for more staff, lower efficiency, downtime, and increased promotional spending. While it’s great to get into the holiday spirit, businesses need to maintain control over expenses to avoid a New Year financial hangover. If you’re bringing in casual staff, ensure they’re paid correctly, including meeting Superannuation Guarantee obligations. Use pay calculators to check rates.
New Year Cashflow Crunch: Prepare for a Slow Start
The post-Christmas period often brings quieter trading and tighter cashflow. The March quarter is typically the toughest of the year for many businesses. To prepare, avoid overcommitting during the holiday rush and ensure you have a cash buffer in place for the New Year.
Debtor Management: Be Proactive
If you work with account customers, start your debtor follow-up early. With cashflow pressures building, being proactive with collections will help ensure you get paid before other creditors. Don’t be the last supplier on your customers' payment list—start chasing outstanding invoices before their funds run dry.
Managing Stock: Avoid Excess Inventory
Many businesses increase stock levels for the holiday season, but overstocking can leave you with cash tied up in unsold goods post-Christmas. Work with suppliers who can provide stock on short notice to avoid carrying excess inventory, and if you do run out of stock in-store, have an online option available to capture sales.
Lessons from Overseas Employment: The Fair Work Implications
The Fair Work Commission recently ruled in a case involving an overseas contractor, demonstrating the risks of incorrectly classifying workers. In the case of Joanna Pascua v Doessel Group Pty Ltd, a Philippines-based contractor was deemed an Australian employee, highlighting the need for businesses working with international contractors to ensure contracts reflect the true nature of the working relationship. Misclassifying workers can lead to significant financial liabilities, including unpaid taxes, payroll, and workers' compensation.
Key Takeaways for Employers
Simply labeling a worker as an independent contractor does not make it so. The contract and working conditions must reflect the true nature of the relationship.
Australian businesses employing overseas workers may still be subject to Australian employment laws, and wage obligations could apply regardless of location.
Be mindful of new Fair Work Act provisions, especially with wage theft becoming a criminal offense from January 2025.
International Workers and Tax Implications
For businesses employing or contracting overseas workers, it's essential to classify the relationship correctly—whether as an employee or independent contractor. Tax and superannuation obligations differ based on this classification. Non-resident employees are typically only taxed on Australian-sourced income, while genuine independent contractors are taxed based on where they perform the work. Consulting with a tax expert is highly recommended.
Student Loans and HECS-HELP Changes
In response to rising student debt, the Australian Government is making changes to the HECS-HELP system, including reducing indexation rates and increasing the minimum repayment threshold. These changes aim to alleviate the financial burden on students, but the legislation is still pending.
Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone.
If expert assistance is required, Contact the team @ Clear Accounting Solutions to run you through your options
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